CP No. 793/2007. Case: Donaman International Panama, SA and Others Vs Venion Enterprises Ltd.. Company Law Board

Case NumberCP No. 793/2007
IssueCompanies Act, 1956 - Sections 108, 111, 111(4), 111A, 111A(2), 111A(3), 155(1)(a)(ii), 163(6), 51; Indian Evidence Act, 1872 - Sections 114(g), 114(III)(e)
Citation2012 (110) CLA 272
Judgement DateMay 15, 2012
CourtCompany Law Board


(Southern Region Bench)

  1. This is a petition filed under section 111A of the Companies Act, 1956 ('the Act') by Donaman International Panama, SA, a company specifically incorporated in the Republic of Panama in the year 1985 for the purpose of investing in the equity capital of Venion Enterprises Ltd. (R1), having its registered office at Mysore, Karnataka, as its chief promoter. The authorised share capital of R1 is Rs. 11 crore divided into 2.20 crore equity shares of Rs. 5 each. As on 31st March, 2006, the issued, subscribed and paid-up share capital of R1 is Rs. 10,90,50,520 divided into 2,18,19,104 equity shares of Rs. 5 each.

    The petitioner had originally subscribed to 42,70,869 equity shares of Rs. 10 each in R1 and was allotted the same quantity of equity shares of Rs. 10 each.

    In pursuance of the approval obtained at the annual general meeting ('AGM') of R1 held on 30th September, 2004, the face value of equity shares of R1 was split to Rs. 5 each fully paid and bonus shares in the ratio of 8 equity shares of Rs. 5 each for every ten equity shares of Rs. 5 and as result of this the equity holding of the petitioner in R1 increased to 1,53,75,128 equity shares of Rs. 5 each fully paid-up. As about 30th September, 2005, the petitioner was a duly registered shareholder, holding a lawful shareholding of 1,53,75,128 equity shares of Rs. 5 each in R1.

    It is claimed that one Mr. Murli Daulatram Datwani, a non-Indian resident ('NRI') residing in Panama City, Republic of Panama is the owner of the entire shareholding of the petitioner in R1 and that the shareholding of the petitioner in R1 has been provided as a collateral security (Vol. 1, Annexure A5, pp. 65-66) by the petitioner to Mr. Murli Daulatram Datwani who had provided loan to the petitioner to subscribe to the shares of R1 vide security agreement dated 10th February, 1994 (Vol. 1 Annexure A4, pp. 47-64) entered into between the petitioner and Mr. Murli Daulatram Datwani. Though the shares were in the name of the petitioner, the original share certificates were entrusted to Mr. Chand Daulatram Datwani (R3), (chairman of R1 since the year 1983), brother of Mr. Murli Daulatram Datwani. Based on the representation and inducement of R3, Mr. Murli Daulatram Datwani, entrusted the entire share certificates of the petitioner to the former for safekeeping, custody purpose only.

    The petitioner has been requesting R1, in its capacity as a major shareholder, to send records of investment, loans, etc., and through its letter dated 18th May, 2005, (Vol. 1, Annexure A8, pp. 71-72) due to non-receipt of any dividend or shareholder's reports from R1, expressing apprehension that there may be serious tax evasion, misappropriation of funds of R1 by R2 to R5. Around June 2006, the petitioner came to know that its entire equity holding in R1 was transferred unauthorisedly and fraudulently to Krishna Enterprises Ltd. (R2). Totally shocked at the fraud played against it, the petitioner sent a letter dated 20th September, 2006 to Mr. G D Ramarao (R5), Compliance Officer of R1 requesting him to inform as to how this unauthorised and fraudulent act had taken place. As there was no reply from either R1 or R5, Mr. Murli Daulatram Datwani spoke over telephone to R5 and he was informed by R5 that the shares of petitioner was transferred to R2 as a consequence of the amalgamation of the petitioner with Krishna Enterprises (R2). R5 refused to give any further information.

    As per the shareholding pattern submitted by R1 to Bombay Stock Exchange ('BSE') since the year 1985 and up to the quarter ended September 2005, (Vol. 1, Annexure A10, p.75) the petitioner was indicated as the rightful holder of 1,53,75,128 equity shares representing 70.50 per cent of the paid-up capital of R1 under the category "foreign promoters". However, the shareholding pattern furnished by R1 to BSE for the quarter ended 31st December, 2005, shows Shri Krishna Enterprises Ltd. (R2) as holding 1,53,75,128 equity shares representing 70.50 per cent of the paid-up capital of R1 under the category "foreign promoters.

    It is claimed that neither the petitioner nor its office-bearers/shareholders was aware of R2 and, therefore, the question of the petitioner amalgamating with R2 does not arise. Therefore, the transfer of the shareholding of the petitioner in R1 to the second respondent-company is fraudulent and criminal conspiracy of the highest order. The petitioner alleges that the general power of attorney ('GPA') granted by it to Mr. Arun Daulatram Datwani (R4), the brother of Mr. Murli Daulatram Datwani, who was its president till 29th October, 1996 and who did not have any connection with it after that date, and he might have fraudulently used the GPA and committed the fraud of enormous proportion in collusion with the other respondents. It is stated that this GPA was revoked by the petitioner by passing resolution at a special meeting of all its shareholders and directors held on 2nd December, 2002 and this resolution was faxed to R1 on 15th January, 2003 (vide Annexure A14, pp. 95-96, vol. 1) and since the GPA given to R4 was withdrawn on 2nd December, 2002, any use of such GPA after the above mentioned date to represent and act on behalf of the petitioner amounts to criminal fraud/misrepresentation and as such the transfer of the petitioner's shareholder to R2 is void ab initio and is an unauthorised/unpaid takeover of shares belonging to petitioner with the active connivance and participation of the respondents by claiming a fake merger to keep the transaction a secret, avoid public offerings and avoid compliance of Indian laws. Therefore, the petitioner prays that (i) the register of members of R1 be rectified by removing the name of R2 as member of R1; (ii) the petitioner's name be entered in the register of members of R1 and 1,53,75,128 equity shares representing 70.50 per cent of the paid-up capital of R1 be restored; (iii) direct R1 to pay to the petitioner all benefits including dividends that might have been declared in respect of the above mentioned shares.

    In the counter filed on behalf of respondents 1 and 5 it is stated that the petitioner-company has originally subscribed for 24,54,971 equity shares of Rs. 10 each and not for 42,70,869 equity shares as claimed. The R1-company claims to have in its possession two overseas auditor's certificate which show that Mr. Murli Daulatram Datwani as holding only 10 per cent of the shares in Donaman (P1) and the balance 90 per cent shares being held by Mr. Arun Daulatram Datwani (R4). R1 has acted on the instructions of the authorised signatory of the petitioner-company as is registered with it and the depository participants and strongly refutes the allegations of fraud. It is further stated by R1 that it has documentary evidence to show that the share certificates of R1 held by petitioner and handed-over by it to Mr. Chand Daulatram Datwani (R3) through a power of attorney signed by the registered authorised signatory of the petitioner and the claims in the petition by the petitioner vis-a-vis the handing over of share-certificates is false, misleading and with ulterior motive. It is stated that R1-company was under no obligation to answer to the letter of the petitioner dated 20th September, 2006 addressed to the compliance officer of R1-company regarding the change in the shareholding pattern of R1 as it was signed by a person whose bona fides are not registered with it as the petitioner had not lodged either the notice of the appointment of the said person or the signature of the authorised signatory with R1 or the depository participant. It is further argued that whereas in the petition Mr. Arun Daulatram Datwani has been stated to have been the president of the petitioner-company till 29th October, 1996, vide p. 95 of the petition one person named Jaime Enrique Vega Garcia claims to be the president since September 1992. It is claimed that since the petitioner has not asked for the information through its authorised signatory with the depository participant and the alleged revocation of GPA issued to Mr. Arun Daulatram Datwani not being in their record, seeking details from R1 does not arise.

    According to the respondents this is a clear case of dispute as to the ownership and rights of the shares in pursuance of a scheme of amalgamation/merger of assets and liabilities of Donaman International, Panama SA, Panama (the petitioner) with Krishna Enterprises Ltd., British Virgin Islands. It is argued that the registered offices of both these companies being outside India, this dispute between the petitioner and R2 has to be settled outside India as this Bench has no jurisdiction. It is further argued that transaction between Donaman International Panama SA (petitioner) and Krishna Enterprises Ltd. (R2) having taken place outside India the subject matter is not for review in this petition. It is claimed that necessary disclosures have been made to Securities and Exchange Board of India ('SEBI') under the guidelines and if there are any violations, it is for the SEBI to take any action as it may deem necessary, it is contended that the petition is barred by limitation, is fictitious, malicious and dismissal of the same with costs is prayed for by the respondent-company.

  2. The petitioner filed a rejoinder, the brief averments of which are as under. The fact that R3, being the chairman of R1 has not chosen to file his counter puts beyond doubt that all allegations made against him are deemed to have been proved. The respondents in their counter have denied the allegations made against them for the sake of denial without producing any material particulars regarding the alleged merger between the petitioner and R2 and this proves their mala fide intentions. It is reiterated that the petitioner holds the shares as has been stated in the petition. Till the time of filing of this rejoinder the respondents have failed to produce the...

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